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Comment by excalibur | Hacker News Reader

That's a good point. Private Equity is a fairly broad umbrella term that encompasses a variety of investment strategies and business models.

The type of Private Equity that most here are referring to is the type that buys up existing businesses, squeezes as much money as possible out of them, and throws their desecrated corpses in the gutter. These "investors" are a blight on society, this activity should be criminalized, they should be in prison.

But there are a lot of well-meaning investors who do great things for society that also get stuck with the same label.

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Just like crows! People hate crows even though they play a valuable role in ecosystems.

I would argue that moribund businesses who maintain a competitive moat but are otherwise extremely unproductive and inefficient are the real blight on society. If PE firms can liquidate those businesses and open up the market while freeing up capital for more productive investment then I fully support them.

I would love to hear some counterexamples though. Productive and innovative businesses with really solid fundamentals (balance sheets) that were acquired and dismantled by PE.

Red Lobster?

Weren't they losing money for years on all-you-can-eat seafood specials [1]?

It's not uncommon in the fast food business to be breaking even or losing money on all aspects of the business while the true value of the company, its real estate portfolio, steadily grows. The fact that investors decided they wanted to cash out should be a surprise to no one.

[1] https://www.fastcompany.com/91129776/what-really-killed-red-...

> Productive and innovative businesses with really solid fundamentals (balance sheets) that were acquired and dismantled by PE.

You have way too much (unneeded) limiting qualifications. In Netherlands PE have bought loads of companies, then put the acquisition price as a loan on the balance sheet. Plus then sold the assets, made the company then lease those assets. Then those companies often went bankrupt as the leasing prices increased crazily.

> I would argue that moribund businesses who maintain a competitive moat but are otherwise extremely unproductive and inefficient are the real blight on society.

The companies I've cited weren't "extremely unproductive and inefficient". Businesses can be profitable and healthy without all the qualifications you think they need.

Do they do actual damage, or is this egghead economic theory?

> The type of Private Equity that most here are referring to is the type that buys up existing businesses, squeezes as much money as possible out of them, and throws their desecrated corpses in the gutter.

And this type of PE represents a very small minority of what is actually considered "Private Equity". The vast majority of PE deals are about growth. This small minority of asset stripping PE groups gets the most headlines though.

Source: my firm works with ~400 PE firms.

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